FSA bans broker for losing £85k of clients’ money

The Financial Services Authority has banned the director of a mortgage and general insurance firm from holding senior positions in the financial services industry after failing to comply with client money rules and the loss of £85,000 of customers’ money.

Matthew Sixsmith was the director of Manchester-based Bridgewater House UK, which dealt mainly in the sub-prime mortgage market, but also arranged life and critical illness cover.

When Bridgewater sold an insurance policy, it would charge its customers two years’ insurance premiums upfront, and then add this amount to the mortgage.

The firm agreed with its customers that it would hold this money and then pay the insurance premiums to insurers on their behalf.

But Sixsmith failed to separate his customers’ money from that of the firm, and used only one bank account under the name of Bridgewater to administer both his business payments and customers’ premium payments  

As a result, when Sixsmith’s firm ceased trading in September last year, approximately £85,000 of customers’ money was lost.

As Bridgewater’s sole director, it was also Sixsmith’s responsibility to ensure that any insurance premiums that customers had lodged with the firm were passed on to the insurers when payments became due.

But approximately 700 policies lapsed because, until May 2008, Sixsmith kept no record of when these payments should begin or end for each of the firm’s customers and therefore he failed to ensure that premiums were paid when due.

Sixsmith failed to take reasonable steps to ensure his business complied with the FSA’s regulations, and therefore breached Statement of Principle 7.

He also failed to ensure that adequate systems and controls were in place to safeguard the firm’s client money.

Margaret Cole, director of enforcement at the FSA, says: “Sixsmith was incompetent and his actions posed serious risks to customers who trusted him with their money and expected him to pass that money on to insurers.

“Individuals who look after client money must act in accordance with the rules. Where they fail to comply, we will not hesitate to take enforcement action against them.”

The FSA would have imposed a penalty of £25,000, but this would have placed Sixsmith in serious financial hardship. Sixsmith will not be able to hold senior positions in the financial services industry